After falling by 60% in 2015, Genesis shares plunge on revised revenue and earnings forecasts.
Talk about a disaster. Just when we thought all senior care stocks had bottomed out, Genesis HealthCare wasn’t done. All the others are now well above their recent lows, but Genesis plunged 32% on Monday and late yesterday was down another 12% when the overall market was up over 200 points. Why? Management revised downward its revenue and EBITDA estimates for 2015, and also revised downward their forecast for 2016. This was the second negative earnings surprise in less than a year, for which values get crucified. But here’s the rub. The share price had already dropped by 31% in December, and had continued to fall with all the other stocks in the sector in early January. So there may have been some “leakage” about the revised forecasts. But here’s the other rub. Adjusted EBITDAR is now expected to grow by 6% to $780 million from revised 2015 numbers, and adjusted EBITDA is forecast to grow by 13% to $282 million. That is not a distressed situation that merits such a plunge in value. But it may signal frustration and a tad of mistrust about anything from management. Still, we have to believe it is an overreaction. Would you buy Genesis at $1.64 a share?
